IN THE COURT OF CHANCERY OF THE STATE OF … · Defendant Lakshmi N. Mittal ("Mittal") is a Goldman director and has ... compensate them for their contributions to the long-term growth

00103860 - 1 -

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JERAN BINNING, Derivatively on Behalf of THE GOLDMAN SACHS GROUP, INC.,

Plaintiff,

v.

ADEBAYO O. OGUNLESI, DAVID A. VINIAR, JAMES A. JOHNSON, WILLIAM W. GEORGE, CLAES DAHLBÄCK, LAKSHMI N. MITTAL, DEBORA L. SPAR, M. MICHELE BURNS, MARK E. TUCKER, PETER OPPENHEIMER, and STEPHEN FRIEDMAN,

Defendants, -and-

THE GOLDMAN SACHS GROUP, INC., a Delaware corporation,

Nominal Defendant.

)) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )) ))

C. A. No.

VERIFIED STOCKHOLDER DERIVATIVE COMPLAINT FOR BREACH

OF FIDUCIARY DUTY AND UNJUST ENRICHMENT

Plaintiff, Jeran Binning ("Plaintiff") by his attorneys, submits this Verified

Stockholder Derivative Complaint for Breach of Fiduciary Duty and Unjust

Enrichment against the defendants named herein.

NATURE AND SUMMARY OF THE ACTION

1. This is a stockholder derivative action brought by Plaintiff on behalf

of nominal defendant The Goldman Sachs Group, Inc. ("Goldman" or the

"Company"). Plaintiff brings this action to halt defendants' illegal self-dealing. In

particular, Goldman's Board of Directors (the "Board") has unfettered ability to

00103860 - 2 -

grant its members an unlimited amount of stock as part of their annual

"compensation." The defendants have abused this power by paying themselves

well beyond what could be considered reasonable or fair. In fact, over the past

three years, Goldman has paid its non-executive directors on average almost

$240,000 more per director than the Company's self-selected peer group.1 Due to

large size of Goldman's Board, this excessive compensation has resulted in

Goldman paying its non-executive directors millions of dollars more than they

deserve.

2. The members of the Board are well aware of the unfairness of their

compensation and that their unlimited power to set their own compensation is

improper. In the Proxy, the Board disclosed it would now compensate directors

with an annual restricted stock unit ("RSU") grant amount tied to a fixed-dollar

amount to align its compensation practice with "the general market practice of

awarding director compensation in fixed-dollar amounts." The fixed-dollar

amount the Board selected for annual RSU grants is $500,000—nearly twice what

Goldman's peers pay their directors. The Board members did not seek to amend

1 In the most recent Definitive Proxy Statement on Schedule 14A (the "Proxy") filed with the U.S. Securities and Exchange Commission on April 10, 2015, the Board claims that the Company's peers are JP Morgan Chase & Co., Bank of America Corporation, Citigroup Inc., and Morgan Stanley. Plaintiff does not concede that this is an appropriate peer group. However, even using defendants' self-selected peer group, Goldman's non-executive directors' compensation is blatantly unfair.

00103860 - 3 -

the Company's compensation plans to include the fixed-dollar amount or to set any

limits for their compensation. Nor did the Board seek stockholder approval for the

2014 compensation disclosed in the Proxy. Thus, the Board retains the unfettered

ability to simply change its approach to compensation or select a different, higher

fixed-dollar amount. Further, if Goldman performs poorly, under this new stated

compensation practice, the members of the Board will still receive $500,000 worth

of RSUs, in addition to whatever cash compensation and other benefits they

receive. Accordingly, even Goldman's new stated compensation practice is

manifestly unfair.

3. Plaintiff now brings this action to recoup the unfair excessive

compensation the director defendants awarded themselves and impose meaningful

restrictions on the Board's ability to award itself compensation going forward.

THE PARTIES

Plaintiff

4. Plaintiff was a stockholder of Goldman at the time of the wrongdoing

complained of, has continuously been a stockholder since that time, and is a

current Goldman stockholder.

Nominal Defendant

5. Nominal defendant Goldman is a Delaware Corporation with principal

executive offices located at 200 West Street, New York, New York. Goldman is a

00103860 - 4 -

global investment banking, securities, and investment management firm that

provides a wide range of financial services to a substantial and diversified client

base that includes corporations, financial institutions, governments, and high-net-

worth individuals.

Defendants

6. Defendant Adebayo O. Ogunlesi ("Ogunlesi") is Goldman's Lead

Director and has been since July 2014 and a director and has been since October

2012. Defendant Ogunlesi is also Chairman of Goldman's Corporate Governance

and Nominating Committee and has been since July 2014 and a member of that

committee and has been since October 2012. Defendant Ogunlesi is an ex-officio

member of Goldman's Compensation Committee and has been since March 2015

and was a member of that committee from October 2012 to March 2015. Goldman

paid defendant Ogunlesi the following compensation as a director:

Fiscal Year

Stock Awards Paid for Services Provided in:

All Other Compensation Total

2014 $600,304 $10,000 $600,304

2013 $590,687 - $590,687

2012 $124,512 - $124,512

7. Defendant David A. Viniar ("Viniar") is a Goldman director and has

been since January 2013. Defendant Viniar was also Goldman's Executive Vice

President and Chief Financial Officer from May 1999 to January 2013; Head of

Operations, Technology, Finance, and Services Division from December 2002 to

00103860 - 5 -

January 2013; Head of the Finance Division and Co-Head of Credit Risk

Management and Advisory and Firmwide Risk from December 2001 to December

2002; and Co-Head of Operations, Finance and Resources from March 1999 to

December 2001. Goldman paid defendant Viniar the following compensation as a

director:

Fiscal Year

Fees Paid for Services Provided

in:



2014 $75,000 $500,019 $20,000 $575,019

2013 $68,750 $457,188 $20,000 $525,938

8. Defendant James A. Johnson ("Johnson") is a Goldman director and

has been since May 1999. Defendant Johnson is also Chairman of Goldman's

Compensation Committee and a member of the Corporate Governance and

Nominating Committee and has been since at least April 2011. Goldman paid

defendant Johnson the following compensation as a director:

Fiscal Year


in:



2014 - $600,304 $20,000 $600,304

2013 - $598,999 - $598,999

2012 $100,000 $423,030 - $523,030

2011 - $383,801 $20,000 $383,801

9. Defendant William W. George ("George") is a Goldman director and

has been since December 2002. Defendant George is also a member of Goldman's

Compensation Committee and Corporate Governance and Nominating Committee

00103860 - 6 -

and has been since at least April 2011. Goldman paid defendant George the

following compensation as a director:

Fiscal Year


in:



2014 - $600,304 $20,000 $600,304

2013 - $598,999 $20,000 $598,999

2012 $75,000 $425,146 $20,000 $500,146

2011 - $358,729 $20,000 $358,729

10. Defendant Claes Dahlbäck ("Dahlbäck") is a Goldman director and

has been since June 2003. Defendant Dahlbäck is also a director of Goldman

Sachs International, a subsidiary of Goldman. Defendant Dahlbäck is a member of

Goldman's Corporate Governance and Nominating Committee and has been since

at least April 2011 and was a member of the Compensation Committee from at

least April 2011 to March 2015. Goldman paid defendant Dahlbäck the following

compensation as a director:

Fiscal Year Stock Awards Paid for Services Provided in:


2014 $575,189 $25,000 $575,189

2013 $573,895 $25,000 $573,895

2012 $498,048 $14,583 $498,048

2011 $358,729 - $358,729

11. Defendant Lakshmi N. Mittal ("Mittal") is a Goldman director and has

been since June 2008. Defendant Mittal is also a member of Goldman's


00103860 - 7 -

and has been since at least April 2011. Goldman paid defendant Mittal the

following compensation as a director:

Fiscal Year Stock Awards Paid for Services Provided in: Total

2014 $575,819 $575,819

2013 $573,895 $573,895

2012 $498,048 $498,048

2011 $358,729 $358,729

12. Defendant Debora L. Spar ("Spar") is a Goldman director and has

been since June 2011. Defendant Spar is also a member of Goldman's


and has been since June 2011. Goldman paid defendant Spar the following


Fiscal Year


in:



2014 $75,000 $500,019 $2,500 $575,019

2013 $75,000 $498,750 - $573,750

2012 $75,000 $423,030 $9,000 $498,030

2011 - $209,315 - $209,315

13. Defendant M. Michele Burns ("Burns") is a Goldman director and has

been since October 2011. Defendant Burns is also a member of Goldman's


and has been since October 2011. Goldman paid defendant Burns the following


Fiscal Year


in:



00103860 - 8 -

2014 $100,000 $500,019 $20,000 $600,019

2013 $100,000 $498,750 $20,000 $598,750

2012 - $514,828 $20,000 $514,828

2011 - $89,739 $20,000 $89,739

14. Defendant Mark E. Tucker ("Tucker") is a Goldman director and has

been since November 2012. Defendant Tucker is also a member of Goldman's

Corporate Governance and Nominating Committee and has been since November

2012 and was a member of the Compensation Committee from November 2012 to

March 2015. Goldman paid defendant Tucker the following compensation as a

director:



2014 $575,189 $20,000 $575,189

2013 $573,895 $10,000 $573,895

2012 $83,055 - $83,055

15. Defendant Peter Oppenheimer ("Oppenheimer") is a Goldman director

and has been since March 2014. Defendant Oppenheimer is also a member of

Goldman's Corporate Governance and Nominating Committee and has been since

March 2014 and was a member of the Compensation Committee from March 2014

to March 2015. Goldman paid defendant Oppenheimer the following




2014 $491,940 $20,000 $491,940

00103860 - 9 -

16. Defendant Stephen Friedman ("Friedman") was a Goldman director

from April 2005 to May 2013. Defendant Friedman also served in various other

positions at The Goldman Sachs Group, L.P., Goldman Sachs's predecessor, from

1966 to 1994, including as Senior Partner and Chairman of the Management

Committee. Defendant Friedman was a member of Goldman's Compensation

Committee and Corporate Governance and Nominating Committee from at least

April 2011 to May 2013. Goldman paid defendant Friedman the following


Fiscal Year


in:



2013 $249,480 - - $249,480

2012 - $523,148 - $523,148

2011 - $383,801 $20,000 $383,801

17. The defendants identified in ¶¶6-16 are referred to herein as the

"Director Defendants" or "Individual Defendants."

GOLDMAN'S EQUITY INCENTIVE PLAN GIVES THE DIRECTOR DEFENDANTS CARTE BLACHE TO SET THEIR OWN

COMPENSATION

18. On April 1, 2003, the Company's stockholders approved the Amended

and Restated Stock Incentive Plan (the "2003 SIP"). The 2003 SIP was allegedly

adopted to "attract, retain, and motivate officers, directors, employees … to

compensate them for their contributions to the long-term growth and profits of the

00103860 - 10 -

Firm and to encourage them to acquire a proprietary interest in the success of the

Firm."

19. The 2003 SIP gave the Board power to appoint a committee to

administer the plan. The committee of the Board had complete discretion over the

administration of the 2003 SIP, including who would receive awards under the

2003 SIP, how many awards, and on what terms. The only limits on the amount of

stock the Board's committee could grant as awards were: (i) the total amount of

stock available to be issued under the 2003 SIP (250 million); and (ii) as of the

2008 fiscal year, the committee of the Board could only grant to a participant

awards equal to 5% of the Company's outstanding stock. As of February 12, 2012,

there were approximately 495 million shares of Goldman stock outstanding.

Accordingly, the only applicable limit was that the committee of the Board could

not grant more than 24.75 million shares, which was worth approximately $2.8

billion at this time. Accordingly, there were no true limits under the 2003 SIP.2

20. The director compensation in 2012 was set by the Compensation

Committee. The Compensation Committee in 2012 consisted of all the non-

2 The Board amended and restated the 2003 SIP in 2008. The amendments did not contain any material changes. The Board also adopted a "Long-term Performance Incentive Plan" on December 17, 2010 (the "LTIP"). The LTIP provides the committee of the Board's selection to administer it, including granting awards under the LTIP, setting the terms of those awards, and amend any rules relating to the LTIP. There are no limitations on the amount of awards the committee can award directors.

00103860 - 11 -

executive directors of the Board. Accordingly, the non-executive directors of the

Board set the amount of compensation that they would receive.

21. In 2013, the Company's stockholders approved the Amended and

Restated Stock Incentive Plan (the "2013 SIP"). The 2013 SIP again gave sole

administrative power to a committee appointed by the Board. The only limit

contained in the 2013 SIP is the limit on the total amount stock available for

issuance as awards, which is sixty million shares, currently worth $12 billion. The

Compensation Committee granted director compensation for 2013 and 2014 under

the 2013 SIP, which continued to consist of all the non-executive directors of the

Board.

22. The Board plans to continue the practice of setting its own pay

without any limitation into perpetuity. The Company's most recent Proxy

describes a single change to the Compensation Committee's compensation

practices. In 2014, the Compensation Committee, with Board approval, stated that

it would change its practice of awarding 3,000 RSUs per year to a fixed-dollar

award of $500,000 in RSUs to each non-executive director. The Board stated that

this change aligns its non-executive members' compensation with "the general

market practice of awarding director compensation in fixed-dollar amounts." This

equity grant is in addition to the cash compensation and other benefits the non-

executive directors receive. Notably, the Board did not seek stockholder approval

00103860 - 12 -

of this change. Further, the Board did not seek stockholder approval to put any

specific limits on the amount of compensation the non-executive directors of the

Board could award themselves. Accordingly, the Compensation Committee could

change its practices at any time.

23. Nor is pegging the amount of compensation members of the Board

receive in stock to a set value fair to stockholders. By setting the amount of RSUs

at a value of $500,000, even if the Company's stock market performs poorly, the

non-executive directors will still receive the same basic amount of compensation.

More, as explained below, this amount is plainly excessive compared to Goldman's

peers.

THE BOARD AWARDS ITSELF EXCESSIVE COMPENSATION

24. In breach of their fiduciary duties, the Director Defendants took

advantage of their ability to set their own compensation to grant themselves

excessive compensation. Since 2012, the Compensation Committee has paid itself

nearly $240,000 more on average than directors in the Company's peer group. The

following table shows the Company's non-executive director compensation

compared to the Compensation Committee's self-selected peer group:

Company Name

2014 Average Comp

2013 Average Comp

2012 Average Comp

THE GOLDMAN SACHS GROUP INC $586,352 $583,291 $511,901

BANK OF AMERICA CORP $308,234 $315,412 $280,471

JPMORGAN CHASE & CO $374,750 $307,813 $278,194

MORGAN STANLEY $347,652 $348,118 $345,833

00103860 - 13 -

CITIGROUP INC $314,375 $315,250 $314,722

PEER GROUP AVERAGE $336,253 $321,648 $304,805

DIFFERENCE $250,099 $261,643 $207,096

25. The following table shows the excessive compensation that each

defendant director received for each full year of Board service:3

Goldman Sachs (GS) Director Compensation

Board Member

Fees Paid in Cash

Stock Awards Total Average Peer Compensation

Compensation Damages

2012

Burns $ - $514,828 $514,828

$304,805

$210,023 Dahlbäck $ - $498,048 $498,048 $193,243

Friedman $ - $523,148 $523,148 $218,343

George $75,000 $425,146 $500,146 $195,341

Johnson $100,000 $423,030 $523,030 $218,225

Mittal $ - $498,048 $498,048 $193,243

Schiro $ - $539,928 $539,928 $235,123

Spar $75,000 $423,030 $498,030 $193,225

Total $250,000 $3,845,206 $4,095,206 n/a $1,656,766

Average $31,250 $480,651 $511,901 n/a $207,096

2013

Burns

$100,000 $498,750 $598,750

$269,234

$277,102

Dahlbäck $ - $573,895 $573,895 $252,247

George $ - $598,999 $598,999 $277,351

Johnson $ - $598,999 $598,999 $277,351

Mittal $- $573,895 $573,895 $252,247

Ogunlesi $ - $590,687 $590,687 $269,039

Schiro $ - $624,103 $624,103 $302,455

Spar $75,000 $498,750 $573,750 $252,102

Tucker $ - $573,895 $573,895 $252,247

Viniar $68,750 $457,188 $525,938 $204,290

Total $5,589,161 $5,832,911 n/a $2,616,431

3 The following table only includes the compensation for directors when they served an entire year in order to accurately compare the yearly compensation of the Company's directors and its peers.

00103860 - 14 -

$243,750

Average $24,375 $558,916 $583,291 n/a $261,643

2014

Burns $100,000 $500,019 $600,019

$329,256

$263,766

Dahlbäck $ - $575,189 $575,189 $238,936

George $ - $600,304 $600,304 $264,051

Johnson $ - $600,304 $600,304 $264,051

Mittal $- $575,819 $575,819 $239,566

Ogunlesi $ - $600,304 $600,304 $264,051

Spar $75,000 $500,019 $575,019 $238,766

Tucker $ - $575,189 $575,189 $238,936

Viniar $75,000 $500,019 $575,019 $238,766

Total $250,000 $5,027,166 $5,277,166 n/a $2,250,889

Average $27,778 $558,574 $586,352 n/a $250,099

Total Compensation Damages $6,524,086

26. The Individual Defendants' excessive compensation is unwarranted.

While the Company's stock has admittedly increased substantially over the past

three years, it is moving in union with Goldman's peer group, as shown by the

following graph:

00103860 - 15 -

27. Absent court intervention, the Director Defendants will continue

paying themselves this excessive amount of compensation.

DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS

28. Plaintiff brings this action derivatively in the right and for the benefit

of Goldman to redress injuries suffered, and to be suffered, by Goldman as a direct

result of breaches of fiduciary duty and unjust enrichment.

29. Plaintiff will adequately and fairly represent the interests of Goldman

in enforcing and prosecuting its rights.

30. Plaintiff was a stockholder of Goldman at the time of the wrongdoing

complained of, has continuously been a stockholder since that time, and is a

current Goldman stockholder.

00103860 - 16 -

31. The current Board of Goldman consists of the following fourteen

individuals: defendants Burns, Dahlbäck, George, Johnson, Mittal, Ogunlesi,

Oppenheimer, Spar, Tucker, and Viniar and non-defendants Lloyd C. Blankfein

("Blankfein"), Gary D. Cohn ("Cohn"), Mark Flaherty and Mark O. Winkleman.

Plaintiff has not made any demand on the present Board to institute this action

because such a demand is excused.

32. Because defendants Burns, Dahlbäck, George, Johnson, Mittal,

Ogunlesi, Oppenheimer, Spar, Tucker, and Viniar, a majority of the Board,

awarded and received the challenged compensation pursuant to an incentive plan

that contains no limits on their compensation, let alone meaningful ones, they stand

on both sides of the compensation awards. Thus, they derived a personal financial

benefit from and had a direct interest in the transactions at issue in this case.

Because they stand on both sides of the challenged compensation awards and

received personal financial benefits from those awards, defendants Burns,

Dahlbäck, George, Johnson, Mittal, Ogunlesi, Oppenheimer, Spar, Tucker, and

Viniar lack disinterest, excusing a demand, and they will have the burden of

proving the entire fairness of their compensation.

33. Non-defendants Blankfein and Cohn are executives at the Company

and thus dependent on defendants Burns, Dahlbäck, George, Johnson, Mittal,

Ogunlesi, Oppenheimer, Spar, Tucker, and Viniar for their compensation.

00103860 - 17 -

Blankfein and Cohn will not vote to initiate litigation against these defendants and

thus risk their future substantial remuneration.

FIRST CAUSE OF ACTION

Against the Individual Defendants for Breach of Fiduciary Duty

34. Plaintiff incorporates by reference and realleges each and every

allegation contained above, as though fully set forth herein.

35. The Individual Defendants and each of them, violated their fiduciary

duty of loyalty by awarding and/or receiving excessive and improper compensation

at the expense of the Company.

36. As a direct and proximate result of the Individual Defendants'

breaches of their fiduciary obligations, Goldman has sustained significant

damages, as alleged herein. As a result of the misconduct alleged herein, these

defendants are liable to the Company.

37. Plaintiff, on behalf of Goldman, has no adequate remedy at law.

SECOND CAUSE OF ACTION

Against the Individual Defendants for Unjust Enrichment

38. Plaintiff incorporates by reference and realleges each and every

allegation contained above, as though fully set forth herein.

39. By their wrongful acts and omissions, the Individual Defendants were

unjustly enriched at the expense of and to the detriment of Goldman. The

00103860 - 18 -

Individual Defendants were unjustly enriched as a result of the compensation and

director remuneration they received while breaching fiduciary duties owed to

Goldman.

40. Plaintiff, as a stockholder and representative of Goldman, seeks

restitution from these defendants, and each of them, and seeks an order of this

Court disgorging all profits, benefits, and other compensation obtained by these

defendants, and each of them, from their wrongful conduct and fiduciary breaches.

41. Plaintiff, on behalf of Goldman, has no adequate remedy at law.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff, on behalf of Goldman, demands judgment as

follows:

A. Against all of the defendants and in favor of the Company for the

amount of damages sustained by the Company as a result of the defendants'

breaches of fiduciary duties and unjust enrichment;

B. Directing Goldman to take all necessary actions to reform and

improve its corporate governance and internal procedures to comply with

applicable laws and to protect Goldman and its stockholders from a repeat of the

damaging events described herein. In particular, the Board must reform the 2013

SIP so that it contains meaningful limits on the amount of stock that it is able to

pay itself and then present such a change to the stockholders for a vote;

00103860 - 19 -

C. Extraordinary equitable and/or injunctive relief as permitted by law,

equity, and state statutory provisions sued hereunder, including attaching,

impounding, imposing a constructive trust on, or otherwise restricting the proceeds

of defendants' trading activities or their other assets so as to assure that Plaintiff on

behalf of Goldman has an effective remedy;

D. Awarding to Goldman restitution from defendants, and each of them,

and ordering disgorgement of all profits, benefits, and other compensation obtained

by the defendants;

E. Awarding to Plaintiff the costs and disbursements of the action,

including reasonable attorneys' fees, accountants' and experts' fees, costs, and

expenses; and

F. Granting such other and further relief as the Court deems just and

proper.

Dated: June 9, 2015 COOCH AND TAYLOR, P.A. /s/Blake A. Bennett

Blake A. Bennett (#5133) The Brandywine Building 1000 West Street, 10th Floor P.O. Box 1680 Wilmington, DE 19899-1680 (302) 984-3889

Attorneys for Plaintiff Of Counsel: ROBBINS ARROYO LLP Brian J. Robbins Felipe J. Arroyo

00103860 - 20 -

Jenny L. Dixon 600 B Street, Suite 1900 San Diego, CA 92101 (619) 525-3990

1029569

Documents

IN THE COURT OF CHANCERY OF THE STATE OF … · Defendant Lakshmi N. Mittal ("Mittal") is a Goldman director and has ... compensate them for their contributions to the long-term growth